After a welcome from two dozen consumer activists wearing life preservers with signs stating "SB 171 is a lifeline for low-income drivers," Senators questioned advocates and insurance industry lobbyists for an hour before moving the bill towards the full Senate. The legislation, sponsored by The Foundation for Taxpayer and Consumer Rights and supported by low-income, minority and religious groups is considered a key to unlocking the problem of the high uninsured motorist rate, which is particularly acute in the state's urban communities.

"In the poorest parts of the state auto insurance remains outrageously expensive because of insurance industry redlining and price gouging, so millions drive uninsured," said Doug Heller, consumer advocate with the Foundation for Taxpayer and Consumer Rights. "It is unconscionable to require all drivers to purchase insurance as we do in California, and not also mandate that insurers sell a basic policy that low-income drivers can actually afford. No family should be expected to choose between food and auto insurance."

Similar to "lifeline" telephone and electricity service, the "Lifeline" auto insurance would be made available to qualifying low-income drivers. The threshold to purchase the policy would be an annual income of 150% of the federal poverty level (approximately $20,000 per year for a family of three) or less and a good driving record. A recent Department of Insurance study estimates that 87% of all uninsured motorists would qualify.

In the plan a "very good" driver — one without a violation point in three years — would pay $300 per year or $25 per month; a "good driver" with no more than one point in the previous three years would pay $400. It is estimated that approximately 85% of participants in the Lifeline plan would qualify for the $300 per year policy. To ensure affordability, the policy's coverage limits are dropped from the standard 15/30/5 to 10/20/3 which, advocates note, still covers the vast majority of auto accidents.

Consumer advocates presented the Committee with an actuarial analysis — a statistical analysis of insurance risk — of the proposed insurance policy. The analysis explained that if one fourth of the state's three to four million uninsured motorists bought the coverage California consumers would save $175 million through reductions in "uninsured motorist" premiums. The analysis illustrated that the Lifeline policy would not require insurers to lose money through this program, but they would not earn a profit, either. The proposal also allows insurance agents to receive a standard commission for each policy sold.

"Lifeline insurance benefits all Californians because, by making insurance available to the low-income drivers who are presently uninsured, it will reduce the chance that anyone will be hit by an uninsured motorist. That means we all pay less. And because the policy will not force insurers to take a loss, this is a win-win-win situation," said Heller.

The bill will next move to the Senate Appropriations Committee and then, it is expected, to the full Senate.